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DEFICIT TO NARROW

GCC real GDP growth to stay weak this year: Moody's

DUBAI, January 16, 2017

The real GDP growth in the GCC in 2017-18 is likely to remain weak by historical standards with an average of 1.6 per cent and ranging from 0.7 per cent for Saudi Arabia to 3.3 per cent for Qatar, a Moody's report said.

The negative outlook for sovereign creditworthiness in 2017 in the Gulf Cooperation Council (GCC) reflects continued headwinds from subdued growth and challenges to further fiscal and structural reforms, said Moody's Investors Service in its annual GCC Sovereign Outlook, published today.

Moody's report, "Sovereigns -- Gulf Cooperation Council: 2017 Outlook --Subdued Growth and Fiscal
Pressures Drive Negative Outlook," is an update to the markets and does not constitute a rating action, it said.

"We expect real GDP growth in the GCC in 2017-18 to remain weak by historical standards with an average of 1.6 per cent and ranging from 0.7 per cent for Saudi Arabia to 3.3 per cent for Qatar," said Mathias Angonin, Analyst at Moody's.

Furthermore, Moody's estimates the GCC's aggregate fiscal deficit will narrow to 7.5 per cent of GDP in 2017 and 4.9 per cent in 2018, from 8.8 per cent of GDP in 2016 and 8.7 per cent of GDP in 2015, mainly as a result of higher oil prices.

Challenges to fiscal deficit reduction stem from potential slipping of fiscal consolidation measures in the face of social pressures, it said.

Fiscal deficits will remain sizeable in Saudi Arabia, Bahrain and Oman given challenges to further
consolidation from comparatively lower per capita incomes than in the higher-rated GCC members and
potential social tensions.

The UAE, Qatar and Kuwait will likely record relatively low fiscal deficits of 3 per cent to 4 per cent of GDP in 2017, it said.

Debt issuance volumes will be lower in 2017 and 2018 compared to 2016, helped by the expected reduction in fiscal deficits. According to Moody's estimates, the debt-to-GDP ratio across the GCC will rise to 31.6 per cent by 2018 from just 10.5 per cent in 2014, adding another $154 billion in government debt in 2017 and 2018. Qatar and Bahrain will likely continue to rely solely on market funding whereas Saudi Arabia, Oman, the UAE and Kuwait will issue debt and make use of government reserves.

Saudi Arabia and Bahrain will record the largest increase in debt between 2016 and 2018, with the government debt-to-GDP ratio rising by around 14 percentage points, Moody's said. For Oman and Kuwait, Moody's expects lower debt increases of around 8-9 percentage points of GDP.

The debt burdens of the UAE and Qatar, on the other hand, are expected to stabilise in 2017 -- having pre-financed part of their 2017 deficits -- and decline in 2018.

Moody's projects that GCC-wide government financial assets will decline to $2.1 trillion by the end of 2017, down from $2.4 trillion in 2014. This will lead to a weakening net asset position for all GCC sovereigns but most pronounced in Saudi Arabia and Oman. - TradeArabia News Service




Tags: GCC | GDP | Moodys |

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